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restrict and tighten the use of independent contractors by remodelers. The state attacks come primarily from the state departments of revenue and labor, but also from the ofces of the attorneys general. The fnal area of attack comes from civil lawsuits, oftentimes class actions, brought by disgruntled installers and their 1-800-sue- you lawyers, claiming that the installer(s) should have been W-2-based employees and not independent contractors. Reclassifcation attacks are very expen- sive to defend, and if lost, can be ruinous, because they trigger a domino-like efect. Here is what can and does impact a con- tractor on the losing end of a reclassifcation attack: past due state and federal payroll with- holding taxes plus penalties and interest, past due worker's compensation insurance, past due employee benefts, past due overtime, past due health insurance, past due retirement benefts, and of course, huge legal fees to the other side. Accordingly, a contractor must under- stand the risks and rewards of this issue, and implement a strong set of state- and product-based protocols to build a brick wall around any ongoing 1099-relationship. QR : In terms of installation crews being treated as subcontractors, it seems the in- dustry has utilized this practice for years. Have the laws been changed considerably? DAVE: For many years there were an es- tablished series of "safe haven" rules that guided remodelers in terms of the method by which they could treat independent con- tractor status. These guidelines exist today, but unfortunately they do not on their own S Corporation (based on the misclassifca- tion of his salespeople). I have asked industry legal expert D. S. Berenson if he agrees with the current seri- ousness of this independent contractor issue. BERENSON: The most dangerous is- sue by far facing the industry through- out the past few years has been installer reclassifcation. This issue has been around for decades, but took a quantum leap forward under the Obama administration, for a variety of rea- sons but perceived "worker rights abuse" would be the main cause. There are three areas of installer reclassi- fcation attack. The frst is by the federal gov- ernment, primarily the Department of Labor and the Internal Revenue Service. Increased funding to these agencies by the Obama ad- ministration over the past years has specif- cally targeted the use of 1099-based labor in the construction industry. Similarly, more than a dozen states have passed targeted anti-contractor legislation in regard to this issue, actively seeking to QR : Dave, give us a general overview. DAVE: The vast majority of our clients have sizable revenue increases for 2015 — vs. — 2014. In the majority of cases proftability has increased as well. However, there are also some critical legal and business management issues, some of which are not really new but have increased in intensity. These should be treated as serious concerns. QR : Give us an example of a serious concern. DAVE: We were recently retained by a client who had just completed paying of a lien of almost $500,000 to the IRS on an em- ployee misclassifcation suit. He had been treating his salespeople as independent contractors and thought he was handling this properly on the advice of both coun- sel (law) and his tax advisor (CPA). At the completion of satisfying the lien, he is now paying of personal liens imposed by both federal and state tax agencies on what constitutes a misreporting of income in his The State of the Industry 2015 As we approach the fnal quarter of 2015, we've asked industry expert Dave Yoho to coment about the major issues that remodelers will face this year and what they might look forward to in the year to come. Dave runs the oldest and largest consulting group in the industry. His response contains remarks by D. S. Berenson, managing partner of Berenson LLP, a law frm specializing in the Home Improvement Industry. 36 SPECIAL SECTION: HOME IMPROVEMENT PRO | October 2015 QR QualifiedRemodeler.com